In the first years after the launch of bitcoin, many altcoins integrated from distributed ledgers relied on the technology of blockchain.
However, this technology involves second layer networks (layer 2) or other solutions such as sharding where the side chains to overcome the lack of scalability.
However, as innovation and experimentation continue, other technologies such as DAG (Directed Acyclic Graph) have been adopted by some projects such as IOTA in order to deliver a technology capable of meeting large-scale demand.
IOTA was the first cryptocurrency to promote this type of distributed ledger with its own integration named Tangle.
Before getting to the heart of the matter, it is important to understand certain concepts and in particular that of DAGs (directed acyclic graphs) on which the project is based IOTA.
What is a DAG?
For simplicity, a graph is a network model connecting nodes by edges. These edges are directed, this means that they have a well-defined direction so that each edge necessarily represents an established directional flow.
Acyclic means that the graph is non-cyclic and therefore you will never be able to go through the same one twice summit while navigating the graph.
DAGs are used in particular in distributed networks in order to obtain a consensus and its structure allows parallelize the blockswhich in theory improves the ability of the network to manage a large number of operations simultaneously.
You might liken this to multiple blockchains producing blocks in an even larger one. blockchain organized.
This aspect therefore allows the networks using them to considerably improve their scalability through the parallelization of transactions.
If you want to dig deeper into the subject, we recommend reading our article explaining in detail what a DAG and how the technology works.
IOTA what is it?
IOTA aims to be the next evolution of distributed ledgers called by focusing on the internet of things.
The Internet of Things (IoT Or Internet of Thing) represents the interconnection between several objects via the internet by assigning them a unique identifier. Thus, these objects are capable of transferring data to each other over a network.
For example, a connected car capable of transferring data to other connected cars such as its speed or its location or even cameras and sensors capable of detecting movements, temperature or humidity in the air and then transferring them in a database.
The IoT is a booming field and for good reason, it simplifies and improves people’s lives using it daily.
IOTA is one such project based on the technology of DAG (Directed Acyclic Graph). This DAG is named Tangle and makes the operation of IOTA relatively different from that of others crypto currencies.
The majority of crypto currencies work through blockchains which secure the state of their registers, their history and data through blocks that they will link together (hence the name chain of blocks or blockchain).
THE blockchains are therefore exposed to a bottleneck when a large number of transactions are submitted to their network.
IOTA was built in such a way as to circumvent this problem with its technology.
The project was founded in 2015 by David Sønstebø, Sergey Ivancheglo, Dominik Schiener and Sergei Popov.
IOTA’s vision is simple, solve the blockchain trilemma by creating a permissionless, highly scalable, fully decentralized, secure and highly accessible network that would be ready to take on large-scale adoption.
The IOTA Tangle: beautiful in theory, but centralized in practice?
As mentioned earlier, IOTA relies on a DAG that will allow it to parallelize its transactions, inherently increasing the transaction throughput that can be supported by its network.
Indeed, on IOTA the most recent transactions verify the oldest. Therefore, when a transaction is sent by a user, he must also validate it. 4 other older ones.
This therefore implies that theoretically, the scalability of IOTA is exponential and infinite, because the more transactions will be submitted to the network, the more it will be able to process.
IOTA works via a classic consensus mechanism of Proof of Work (Proof of Work) simplified compared to that of Bitcoin. The device used by a user will perform calculations in order to validate four previous transactionss present on the network.
Note : IOTA went from 2 to 4 previous transactions with the 2021 Stardust update.
The PoW in IOTA only serves as an anti-spam mechanism (like the Hashcash ofAdam Back). IOTA has no transaction fees so theoretically without this anti-spam mechanism sending 1000 TPS continuously could easily saturate the network and crash nodes.
The problem with IOTA is that the network is currently centralized. Historically, a transaction on the network is considered valid if and only if it is referenced by a milestone issued by a knot managed by the IOTA foundation called the coordinator.
Additionally since the IOTA network has no transaction fees, users have no economic incentive to run a validator node on the network unlike Bitcoin Or Ethereum For example.
We can find this same type of problem on crypto currencies NANO which works a little differently than IOTA but also has no transaction fees.
If you want read constructive criticism about the centralization and the theoretical inability of the IOTA network to resist censorship transactions, we invite you to read Eric Wall’s post about itthis post dates from 2017, since IOTA has made a publication in turn to indicate that the network has become completely decentralized (available here) with its version 2.0 in 2021.
The constructive criticism that can be made of the project is as follows: can the project be considered decentralized if only the foundation behind the protocol maintains the project?
Layer 1 does not offer smart contracts to date, only pure transactional and this transactional has no transaction fee system. Last thing, block explorer provided by IOTA does not really make it possible to trace everything that happens on the directed acyclic graph, so it is difficult to know if the protocol has suffered from double spending (creation of money from nothing).
Tangle: the technology behind IOTA
THE Tangle is a replicated data structure on the nodes of the network and containing all the data necessary to track the tokens on the network.
It forms a DAG (Directed Acyclic Graph) in which the “child” blocks have several parent blocks as briefly explained in the section dedicated to the DAG.
Tangle works like a protocol of consensus probabilistic in which parallel validation of transactions is allowed without requiring total scheduling as a blockchain would.
IOTA also uses the UTXO (Unspent Transaction Output) model often used in distributed ledger technology. It is he who also allows this parallelization by admitting that transactions can be added in any order.
This process is at the heart of solving the scalability and bottleneck problem that current blockchain systems face.
In addition, the IOTA network offers itself the luxury of charging no transaction fees to its users, regardless of the amount sent, which can be seen as a major advantage over its competitors.
IOTA’s MIOTA token
Like any self-respecting project, it has its native token, the MIOTA.
There are currently 2.78 billion tokens in circulation representing 100% of the tokens issued for a total capitalization of 701 million dollars at the time of writing this article, making it one of the crypto currencies of the top 70.
During its fundraising (crowdsale) in 2015, it was nearly 1337 bitcoins which had been harvested for around 1 billion tokens sold.
If you want to get it, know that the IOTA Token is available on several large exchange platforms such as BinanceGate.io and Bitfinex to name only those with the largest volume.
IOTA a feeless system
Basically the vast majority if not all other blockchain networks using a consensus mechanism Proof of Stake (PoS) or Proof of Work applies transaction fees to its users.
In fact, these fees will have the direct task of partially rewarding the minors or stakers who have secured the network thanks to their computing power in the first case and for the escrow of their tokens in the second.
IOTA was designed to require no fees when processing transactions. This makes it an interesting competitor to other more traditional networks and therefore encourages microtransactions within it.
In other words, in all transactions made on IOTA, the amount deducted from the sender’s wallet is exactly the same as the amount added to the recipient’s wallet.
Indeed, having no miner or staker, IOTA has its transactions validated by the users themselves (as explained above), which allows it to apply no fees, because there is simply no one to reward.
The IOTA system is therefore based on the participation of its users who, if they wish to submit a transaction, will also have to contribute by validating 2 other transactions.
As such, it overcomes the cost and scalability limitations of the system.
In itself, the project reveals new concepts that are very little exploited in the distributed network market and could be the subject of mass adoption.
Its strengths emerge relatively easily, in particular by the fact of not having any costs, which improves the accessibility of the network, but also with its enormous partnerships made for example with the automobile giant Volkswagen or Microsoft.
More recently, IOTA has been the subject of a potential collaboration with governments for the creation of CBDCwhich could greatly promote the adoption of the protocol.
Nevertheless, the Internet of Things market is not directly linked to IOTA and could continue to develop without IOTA managing to do well.
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